Buying a newly built home, otherwise referred to as pre-construction, is an exciting option for those looking for a home with modern amenities and customizable features. However, the process can involve more uncertainty than you’d face buying something already built. Here is what to expect when buying pre-construction.
Look Into the Builder
In most pre-construction cases, builders reserve the right to make changes to the building, its amenities, or even individual condo units at their own discretion. It’s important to be aware that what you’ve seen in the presentation center or marketing may change. It’s always important to research the developers and their past projects to get a better sense of the quality you can expect.
Consider Closing Costs
New developments can come with higher closing costs than pre-existing homes. Aside from the fees the developer may charge for certain upgrades, you may also be faced with unexpected costs like development charges or utility hookup fees. It is best to work with a real estate expert when buying pre-construction to be sure you’re charged fairly. Most lawyers will suggest putting a cap on these fees.
Taxes, Rebates and Exemptions
New home purchases in Canada come with an additional Harmonized Sales Tax (HST), however, you may be eligible for a tax rebate if you or an immediate family member are planning on living in the new home as your primary residence (as opposed to renting the property out or buying it as an investment).
When buying a newly built home in Canada, the property tax exemption threshold is higher than when buying resale homes. You may qualify for a property tax exemption when buying pre-construction for a purchase price of up to a certain amount.
The Payment Schedule
Pre-construction home purchases are typically spread out over a period of several months or years. Typically, a 20% deposit is required on a pre-construction condo, to be paid in increments of 5%. At signing, you’ll be required to pay 5% of the deposit, which is cashed after a 10 day cool-off period. The next 5% is due within 30 days, and the following 5% is generally paid after either 60 days or 90 days. The remaining 5% can be required anywhere from four months to a year after signing, or upon occupancy.
While this is a comprehensive overview of what you can expect when buying pre-construction properties in Canada, you should always cross-verify the information with a real estate expert to ensure its compliance with any recent updates or changes in Canadian real estate regulations.If you’re looking to explore new developments in your community, contact one of our specialized real estate agents to help walk you through the process of buying pre-construction and help you find new developments in your preferred community.